You want to hire employees who live in another country. You’ve found valuable talent, and they’re eager to join your team. There’s only one thing in the way: A local office that can handle those essentials like payroll, benefits, and support for those foreign professionals. When a business reaches this point, there are two paths to choose from. You can set up a local office and begin expanding your business into the new country or work with an Employer of Record (EOR) to act as your local HR proxy. While both options are viable, the cost-effectiveness of EOR services often makes them the smarter choice, especially for companies aiming to scale quickly and efficiently.
This isn’t just a matter of legal entities. It can have a profound impact on your budget. An EOR is designed to optimize costs so companies can hire across borders. However, setting up a local entity involves the costs of opening a new business location and establishing it abroad.
So, what is the true cost-effectiveness of EOR services? They are easiest to see when you compare them directly to the alternative. Let’s explore the budgetary implications of opening a foreign office versus partnering with an EOR.
Setting Up a Foreign Business Office
Establishing a local office has some concrete costs, making the cost-effectiveness of EOR services more apparent. The location and utilities, the office staff, the local permits, and the location overhead are a given. But if this is your first office in a new country, you’ll have additional fees and potential costs to consider.
Renting Office Space
Office space can be significantly expensive, depending on the business location. If you need the office within commuting distance of your cross-border employees, you may need to establish in a specific city. Your business model may also require proximity to certain services or your target customer base. You must consider rent, utilities, and licenses necessary to operate your business in the chosen city or zone.
Business Registration Fees
Another factor that highlights the cost-effectiveness of EOR services versus setting up a local entity is the cost of registration fees. To establish your business in a new country, you will need to register in that country. This is similar to founding a new business because the foreign branch must adhere to a distinct set of laws, pay different taxes, and maintain registration in the foreign country.
Securing Business Insurance
In addition to a location and registration, the new business will need a comprehensive business insurance policy. You will need to prepare for the typical liability protections, the weather conditions in the new region, and specific insurance requirements set by an entirely new set of regulations and business laws.
Legal and Admin Costs
Your new business location will also need comprehensive legal and administrative support. Whether you hire in-house or outsource, you must plan for legal fees and admin services to ensure your business complies with the regulations defined by the new country. This shows the cost-effectiveness of EOR services compared to setting up a foreign business office.
Local Director and Staff Salary
You will also need people to staff your location. Budget for the salary of a local director and the staff required to keep the facility running smoothly. Depending on the nature of your business, this may be limited to office roles or an entire staff workforce to fill all necessary roles according to your business model.
Relocation Costs
If you are moving an expert from the home office to the new location, don’t forget to calculate relocation costs. Relocation may involve extended temporary housing and a stipend if the position is interim, while the local director is trained. It may also require sponsoring a full household move across the border to a new home in the region.
Local Business Taxes
Lastly, your new business location, registered as a corporate entity in the new country, must pay local taxes. Every nation and municipality within each nation has its tax requirements. You will need tax professionals who practice in the region to help you determine the right taxes and how to pay them, in addition to the cost of the taxes themselves.
Contracting With an EOR for Cross-Border Employees
What is the cost-effectiveness of EOR services compared to setting up a local office? An EOR service typically charges a flat or scaling fee per employee you hire through the partnership. This makes planning your budget simple, predictable, and significantly lower than expanding your business operations into a new country.
An EOR is a local business that serves as the HR proxy for companies operating in other countries. “Employer of Record” means the EOR hires employees on your behalf. They are the legal employer for your cross-border employees. They are a registered business with all necessary office staff, regulatory compliance, and taxes already taken care of. From there, they handle hiring, paperwork, and HR services like arranging for local benefits providers, distributing payroll, and labor law compliance that aligns with the requirements of maintaining employees in the other country.
The cost-effectiveness of EOR services stems from the fact that an EOR works for multiple companies, offering the same savings advantages as any outsourced service. Clients like your business pay predictable and comparatively low service fees in return for the full scope of an outsourced HR department ready to take care of your employees hired across national borders.
Cost-Effective Hiring of Remote Canadian Talent
If you’re looking to expand your search for talent into the Canadian workforce, BrightR can help. Our EOR makes it possible to efficiently hire Canadian professionals for remote and hybrid roles without establishing a business location in Canada. We will handle payroll, benefits, and support, and collaborate with you to create custom solutions as needed. Whether you are looking to hire a single genius who would be perfect for your current needs or expand your hiring access to talented professionals throughout the Canadian provinces, we will be your employer of record.
Contact us today to learn more about the cost-effectiveness of EOR services!
